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COMMERCE CASE MANAGEMENT PROGRAM DECISIONS:PIERCING THE CORPORATE VEIL CASESPETER ELEK, JENNIFER Y. SANG AND LEE APPLEBAUM1
The following summaries address piercing the corporate veil and alter ego
Opinions issued by the Commerce Court. In addition, the Court’s Opinions concerning
the “participation theory” are set forth below as well.
Shortly after this Chapter’s original publication in 2008, the Superior Court issued
1Peter Elek, Class of 2008, Temple University’s James E. Beasley School of Law, and Jennifer Y. Sang, Class of 2008, Temple University’s James E. Beasley School of Law, are the authors of the following summaries. Lee Applebaum, a Litigation Partner at Fineman, Krekstein & Harris, P.C., is the editor and author of the introduction and update. This chapter originally addressed cases through October 8, 2007. This update is as of July 4, 2008, and, among other things, adds a summary of Fletcher-Harlee v. Szymanski; but the authors do not perform any analysis of how that Opinion might affect the decisions in prior Commerce Court cases, which is left to the reader.
This work is part of a joint project that originated between the Philadelphia Bar
Association’s Business Law Section and its Business Litigation Committee, and Temple’s Beasley School of Law; which effort has now been expanded to include students from the Rutgers-Camden School of Law. Students work with a lawyer mentor/editor to summarize and describe opinions in the Commerce Case Management Program by distinct areas of subject matter. Each lawyer works with one, two or three law students on a particular area of the law in which the Commerce Program Judges have issued opinions, with the students doing the research and writing and the lawyer guiding and editing the work. As completed, each “chapter” will be posted on the Business Litigation Committee’s web page, which can be located on the Bar Association’s website, http://www.philadelphiabar.org/, with the goal to catch up to the hundreds of opinions already written, and then to keep up with the well over 100 opinions added annually. Ideally, we hope to publish this compilation in a single book. If you are interested in participating in this project, that has so many potential benefits, please contact Lee Applebaum at (215) 893-8702 or lapplebaum@finemanlawfirm.com. Temple Law Professor William J. Woodward, Jr. was and is essential to the creation and development of this effort, and Professor Eve Klothen has brought Rutgers-Camden School of Law students into the effort.
its Opinion in Fletcher-Harlee Corp. v. Szymanski.2 As the Superior Court itself stated:
“’there appears to be no clear test or well settled rule in Pennsylvania . . . as to exactly
when the corporate veil can be pierced and when it may not be pierced.’”3 In this case,
the Court plainly intends to clarify the law. The case went to trial (nonjury) on the veil
piercing issues, providing the court with this opportunity. The Opinion is now treated by
some as the guiding light on the subject.
In providing context and history on piercing the veil, the Superior Court first
raises the Pennsylvania Supreme Court’s oft-cited language from Lumax Industries, Inc.
We note at the outset that there is a strong presumption in Pennsylvania against piercing the corporate veil. Also, the general rule is that a corporation shall be regarded as an independent entity even if its stock is owned entirely by one person.
Commonwealth Court has set out the factors to be considered in disregarding the corporate form as follows: undercapitalization, failure to adhere to corporate formalities, substantial intermingling of corporate and personal affairs and use of the corporate form to perpetrate a fraud.
The Court then quotes from its own opinion in The Village at Camelback Property
Owners Association, Inc. v. Carr,5 as part of a “more thorough discussion” on the subject.
The emphasis in Village of Camelback was on the broader concepts of injustice and
equity, rather than taking a checklist of elements approach. Importantly, the Court states
2936 A.2d 87 (Pa. Super. 2007), appeal denied, 598 Pa. 768 (2008), cert. denied, 129 S. Ct. 1581 (2009). Subsequent application of Fletcher-Harlee in Pennsylvania’s state and federal courts is not within the scope of this Chapter.3Id. at 95 (citation omitted). 4543 Pa. 38, 669 A.2d 893, 895 (1995). 5371 Pa. Super. 452, 538 A.2d 528, 532-533 (Pa. Super. 1988).
that piercing the corporate veil does not require proving actual fraud; rather the focus is
After a thorough restatement of relevant facts from the record, the Superior Court
considers the Lumax Industries factors as a “starting point.” It then finds that two factors
favor piercing the veil: there was undercapitalization and a failure to adhere to corporate
formalities. On the other hand, there was not a substantial intermingling of corporate and
personal affairs, and that there was no proof of fraud. On this last point, the Court
addresses the issue of whether fraud in this context requires proving common law fraud.
The Superior Court responds by observing that “any definition of fraud necessarily
includes a knowing misrepresentation of a fact by one party which induced another party
to act or to fail to act, which, in the end, caused damage to the party who relied upon the
misrepresentation.”6 That standard could not be met in this case. However, this did not
Adhering to its intended course, i.e., to treat piercing the veil broadly and to place
the Lumax Industries elements within that broader context, the Superior Court begins the
next section of its Opinion with the heading: “Beyond the Lumax Industry Factors.” It
then quotes from Village of Camelback again, particularly emphasizing the following
language: “In deciding whether to pierce the corporate veil, courts are basically
concerned with determining if equity requires that the shareholders’ traditional insulation
from personal liability be disregarded and with ascertaining if the corporate form is a
sham, constituting a facade for the operations of the dominant shareholder.” It is only in
this context, and in light of these principles, that courts inquire into “whether corporate
formalities have been observed and corporate records kept, whether officers and directors
other than the dominant shareholder himself actually function, and whether the dominant
shareholder has used the assets of the corporation as if they were his own.”7
The Court then reiterates the two Lumax Industries elements that it had previously
found proven; adduced that even though there was no proof of substantial intermingling,
there was proof of some intermingling of personal and corporate affairs; and that the
individual owner himself disregarded his corporation’s separate legal status as to his
family of corporations, further rendering that separation a sham. Additionally, the
principal “made little effort to ensure that the interests of [the corporation] diverged from
his personal interests and the interests of his other businesses.” His supposedly different
entities had the same business address, shared the same office and even had the same
computer and sole employee. Interestingly, the court considered the principal’s lack of
credibility, even during the litigation process, in questioning his explanations for later
incorporating a new, supposedly distinct, corporation. He was “the sole shareholder,
director, and officer” of these entities which were all in the same (concrete) business,8
i.e., there was no credible reason to have created a new company doing what the old
company did other than to avoid a judgment on the old corporation, and to continue the
The Superior Court rejected the fear that the term “injustice” should be treated as
an “ephemeral” concept that could be abused in a piercing the veil analysis; rather, it
turned the word into a new term of art, describing the sham legal distinctions between
corporations as ephemeral. It reversed the trial court, finding it error not to have pierced
COMMERCE COURT OPINIONS10PIERCING THE CORPORATE VEIL CLAIMS PERMITEDGoldenberg v. Royal Petroleum Corp., September Term 2003, No. 004168, 2004 Phila. Ct. Com. Pl. LEXIS 45 (C.C.P. Phila. Dec. 2004) (Jones, J.) (holding the Defendants’ actions sufficient to pierce the corporate veil under the alter-ego theory and for self-dealing)This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/030904168.pdf.
Edwin R. Goldenberg (“Goldenberg”) was a minority shareholder of Royal
Petroleum Corporation (“Royal”) and Acme Oil Corporation (“Acme”). Goldberg
alleged that Don Wenger and Ruth Leventhal Nathanson (collectively the “Defendants”)
together owned a majority interest in Royal and Acme. Goldenberg claimed that he was
oppressed and mistreated in various ways through Defendants’ improper actions, causing
him stock losses; and that the Defendants should have been held liable under the theory
of piercing the corporate veil for his damages. Defendants asserted preliminary
objections seeking dismissal of this claim.
The Court observed that under Pennsylvania law, even where a corporation’s
stock is owned entirely by one person, the corporation is to be treated as a separate and
independent entity. This creates a strong presumption against piercing the corporate veil.
The Pennsylvania courts will disregard the corporate veil under a limited number a
when [the corporate form is] used to defeat public
9Id.10 The Commerce Court case Opinions summarized herein were last updated on October 9, 2010. The appellate case law cited above is not updated.
convenience, justify wrong, protect fraud or defend crime, and only after considering factors as undercapitalization, failure to adhere to corporate formalities, substantial intermingling of corporate and personal affairs, and use of the corporate form to perpetrate a fraud.11
The Court further stated that when an individual or corporate owner sufficiently controls
the corporation, the “alter-ego theory” of piercing the corporate can create liability for the
In the case at bar, Plaintiff Goldenberg sufficiently pleaded a claim to pierce
Acme and Royal’s corporate veil. To support his veil piercing argument, Goldenberg had
alleged: (1) that the Defendants dominated and controlled Acme and Royal, such that
they caused Acme and Royal to experience losses; and (2) self-dealing by the individual
Defendants. The Court held that, as pleaded, these allegations were sufficiently specific
to satisfy the strict pleading requirements to pierce the corporate veil.13
James J. Gory Mechanical Contracting, Inc. v. Turchi, August Term 2004, No. 3361, 2005 Phila. Ct. Com. Pl. LEXIS 125 (C.C.P. Phila. March 31, 2005) (Jones, J.) (Court found the Plaintiff alleged sufficient facts to establish a cause of action under the theory of piercing the corporate veil).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/040803361.pdf.
In James J. Gory Mechanical Contracting, Inc., the Court overruled the
defendant’s preliminary objections. Defendant John J. Turchi, Jr. (“Mr. Turchi”) had
demurred, claiming that the complaint failed to aver facts sufficient to pierce the
corporate veil to hold him personally liable.
11First Union Bank v. Quality Carriers, Inc., 48 Pa. D. & C. 4th 1, 50 (C.C.P. Phila. 2000).12Miners, Inc. v. Alpine Equipment Corp., 722 A.2d 691, 695 (Pa. Super. 1998).13The Court cited to Lumax Industries, Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893 (1995) for the proposition that a “claim for piercing the corporate veil will be dismissed if it is not supported by specific factual averments, rather than mere legal conclusions”. Goldenberg was favorably cited in Motorola, Inc. v. Airdesk, Inc., No. 04-4940, 2005 U.S. Dist. LEXIS 6601 (E.D. Pa. April 15, 2005) (Kauffman, J.).
In the case at bar, the following Defendants were allegedly controlled by Mr.
Turchi, who was the principal officer, employee, and owner of the following: Turchi,
Inc.; Walnut Construction Corp.; 400 Walnut Associates, LP; 400 Walnut Corporation;
1700 Association, LP; 1700 Corporation; 1930-34 Associates, LP; and 1930-34
Corporation (collectively the “Defendants”).
Between June 2001 and January 2004, the Defendants employed James J. Gory
Mechanical Contracting, Inc. (“Plaintiff”) to do work for them on various projects; and in
each instance paid the Plaintiff less than it invoiced on those jobs. On each of these jobs,
the Plaintiff made claims for the unpaid balances against both the Defendants and Mr.
Turchi individually, seeking to pierce the corporate veil against Mr. Turchi.
The Court used the Pennsylvania factors test to determine whether to pierce the
corporate veil,14 and after applying this law to the facts pleaded, and making all
inferences reasonably deducible therefrom, the Court could not resolve all doubts in favor
of granting a demurrer. The Court opined that the Plaintiff met its burden by alleging in
its complaint that “Mr. Turchi dominate[d] and control[led] the other Defendants, use[d]
them as his alter ego, misrepresented their status in dealings with [James J. Gory
Mechanical] Contracting, and kept certain of them undercapitalized.”
14Pennsylvania’s courts look to the following factors to determine whether to pierce the corporate veil: (1) undercapitalization; (2) failure to adhere to corporate formalities; (3) substantial intermingling of corporate and personal affairs; and (4) use of the corporate form to perpetrate a fraud. Lumax Industries, Inc. v. Aultman, 543 Pa. 38, 42, 669 A.2d 893, 895 (1995); Village at Camelback Prop. Owners Ass’n, Inc., 538 A.2d 528, 533 (Pa. Super. 1988), aff’d, 524 Pa. 330, 572 A.2d 1 (1990).City of Philadelphia v. Human Services Consultants, II, Inc., March Term 2003, No. 00950, 2004 WL 717240, 2004 Phila. Ct. Com. Pl. LEXIS 26 (C.C.P. Phila. Mar. 23 2004) (Jones, J.) (Court sustained Defendants’ preliminary objections relating to piercing the corporate veil to reach one individual, but overruled Defendants’ preliminary objections relating to piercing the corporate veil to reach another individual). This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/030300950.pdf.
The Court in Human Services Consultants found that Plaintiffs failed to state a
claim under the piercing the corporate veil theory against one individual Defendant, but
did state a claim under the piercing the corporate veil theory against another individual
Plaintiffs, City of Philadelphia, County of Luzerne, and County of Lehigh,
brought the instant lawsuit against Defendants Human Services Consultants, II, Inc.
(“HSCII”), Human Services Consultants Management, Inc. (“HSCM”), Richard Adams,
Linda Adams, and Edgewater, Inc. The suit arose out of three separate contracts for
residential services to mentally ill and mentally retarded individuals. Although Richard
Adams and Linda Adams were not parties to the contracts, Plaintiffs argue that the
allegations in their complaint were sufficient to pierce the corporate veil to reach the
Adams, who owned and managed HSCII and HSCM.
The Court started its analysis by noting there is a strong presumption against
piercing the corporate veil in Pennsylvania.15 Piercing the corporate veil is the exception,
and courts should always begin with the general rule that the corporate entity should be
upheld unless specific and unusual circumstances call for the exception.16 The following
factors are to be considered in determining whether the corporate veil should be pierced
15Lumax Indus., Inc. v. Aultman, 543 Pa. 38669 A.2d 893, 895 (1995).16JK Roller Architects, LLC v. Tower Investments, Inc., 2003 Phila. Ct. Com. Pl. LEXIS 40 (C.C.P. Phila. Mar. 17 2003) (Jones, J.) (quoting First Realvest, Inc. v. Avery Builders, Inc., 600 A.2d 601, 604 (Pa. Super. 1991)).
in Pennsylvania: (1) undercapitalization; (2) failure to adhere to corporate formalities; (3)
substantial intermingling of corporate and personal affairs; and (4) use of the corporate
In order to withstand Defendants’ demurrer, Plaintiffs had to set forth facts to
support the liability averred in their complaint. The Court found that Plaintiffs’
complaint failed to support piercing the corporate veil against Linda Adams. Plaintiffs
argued that Linda Adams was the second in command with absolute control over the
management and financial affairs of the corporate entities. The Court found this
“insufficient to support the extreme remedy of piercing the corporate veil.” The Court
stated “that a corporation shall be regarded as an independent entity even if its stock is
owned entirely by one person.” Furthermore, the Court found Plaintiffs’ allegations that
HSCM needed extra money from HSC to fund Linda Adam’s lavish lifestyle to be
conclusions of law. Plaintiffs failed to allege what Linda Adams purportedly did to bring
her actions within the parameters of piercing the corporate veil, and her demurrer was
While similar claims of command and control were inadequate bases for a
piercing the veil claim against Richard Adams, the Court determined that five other
paragraphs of the Plaintiffs’ complaint adequately set forth conduct in which Richard
Adams allegedly engaged that would bring his actions within the parameters of a piercing
17Id. (quoting Lumax Indus., Inc. v. Aultman). 18The details of these allegations were not set out in the Opinion.Temple University Health System, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., February Term 2004, No. 1547, 2005 WL 167583, 2005 Phila. Ct. Com. Pl. LEXIS 21 (C.C.P. Phila. Jan. 7 2005) (Jones, J.), affirmed in part and reversed in part, Temple University Health System, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., 898 A.2d 1143 (Pa. Super. 2006) (without opinion)19 (Court granted Plaintiffs’ motion for judgment on the pleadings against non-signatories in light of piercing the veil claims). This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/040201547.pdf).
The Court in Temple University Health System determined that the gist of the
action doctrine was appropriately applied to parties who were not signatories to the
agreement in contest, because the non-signatories’ alleged conduct could potentially
result in piercing the corporate veil, and permitting the same contract claims against them
Plaintiffs, Temple University Health Systems, Inc. (“TUHS”), Temple University
Hospital, Inc. (“TUH”), Greater Philadelphia Health Services III Corporation (“GPHS”),
and several individuals, brought this cause of action against Defendant National Union
Fire Insurance Company of Pittsburgh (“NUFIC”). Plaintiffs, insured by NUFIC, sought
a declaration that NUFIC had a duty to defend and indemnify the insured corporate
entities and indemnify the insured individuals in another lawsuit, Aim High Income
Municipal Fund v. Temple University Health Systems, Inc. (“Aim High”).
The underlying plaintiffs in Aim High had brought their suit against the instant
declaratory judgment Plaintiffs for both breach of contract and negligence. The
insurance carrier took the position that the underlying claims were based on a breach of
contract claim, and the insurance policy excluded coverage for contract claims. The
19The January 7, 2005 opinion was incorporated into Temple University Health System, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., February Term 2004, No. 1547, 2005 Phila. Ct. Com. Pl. LEXIS 1 (C.C.P. Phila. Mar. 18 2005) (Jones, J.).
Court found that the gist of the underlying action was in contract, not negligence, and
The instant Plaintiffs, however, attempted to shield themselves from the
consequences of the gist of the action doctrine by asserting that not every corporate
Plaintiff herein signed the contract at issue in the Aim High case. Although the Court
recognized that TUHS was not a signatory to that agreement, it reasoned that because the
Aim High plaintiffs alleged conduct which could potentially pierce the corporate veil of
GPHS to reach TUH and TUHS, the application of the gist of the action doctrine was
Fineman & Bach, P.C. v. Wilfran Agricultural Industries, Inc., March Term 2001, No. 2121, 53 Pa. D. & C.4th 62 (C.C.P. Phila. July 30, 2001) (Herron, J.) (alter ego claims permitted in suit by law firm against individuals for corporate client’s legal fees).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/fine730.pdf.
A law firm brought claims against a former client and its principals, a husband
and wife, alleging liability for unpaid legal fees. The individuals were also alleged to be
firm clients in their own right. The principals allegedly promised to pay the corporate
legal fees and in fact did so for a time, but subsequently ceased doing so. The law firm
claimed that the individuals were liable for both their own outstanding legal fees and
those of the corporation. The firm claimed that the corporation was controlled by the
principals, and was an alter ego, artifice and façade. The Court found that the Complaint
was sufficiently specific, though barely, to withstand dismissal; and permitted a claim for
liability on the corporation’s legal fees to proceed against the individuals.PIERCING THE CORPORATE VEIL CLAIMS REJECTEDSandler v. Nunez, December Term 2007, No. 5045, 2009 Phila. Ct. Com. Pl. LEXIS 188 (C.C.P. Phila. Sept. 22, 2009) (Bernstein, J.) (holding that unopposed facts by defendant in support of motion for summary judgment defeated corporate veil allegations).This Opinion is available at http://www.courts.phila.gov/pdf/cpcvcomprg/071205045.pdf.
Plaintiff’s Amended Complaint alleged, among other things, that he should be
allowed to pierce the corporate veil of F.I.V.A. Corporation (“FIVA”) to seek liability
directly against its CEO, Robert Nunez. This included allegations that Nunez allegedly
traded under FIVA’s name; that FIVA was “believed to be undercapitalized”; that FIVA
was “believed to have been undercapitalized to carry on its business”; that Nunez
controlled FIVA as its sole shareholder; that Nunez is “believed to” substantially
intermingle his and FIVA’s assets and affairs; that he is “believed to” disregard corporate
formalities; that Nunez is “believed to” used the corporate form to further injustice; and
that he was “believed to” use FIVA to violate Pennsylvania’s Real Estate Licensing
Nunez filed a summary judgment motion. Instead of responding, Plaintiff filed
Preliminary Objections. These were overruled and the Plaintiff was ordered to respond to
the Summary Judgment Motion. The Plaintiff responded generally, but failed to respond
to the factual averments in the paragraph by paragraph allegations in the Motion.
Plaintiff thus admitted the facts averred, which included: that Nunez was FIVA’s CEO;
FIVA was a New York corporation registered to do business in Pennsylvania; FIVA filed
its own corporate returns and maintained corporate minutes; Nunez filed his own
personal tax returns based on the income he received as an officer of FIVA; Plaintiff
sought to buy two investment properties in Philadelphia based on his projected income;
Nunez, as a FIVA officer, gave Plaintiff advice on two properties; Plaintiff thoroughly
inspected the properties; Plaintiff applied for loans; Plaintiff was given FIVA contracts
for renovation work, but claims he did not sign them; Nunez did not sign any of the
contracts; throughout all of the transactions and construction, Nunez held himself out to
Plaintiff as a public officer of FIVA; all checks paid to FIVA for construction work were
made out to FIVA; all renovation contracts offered to Plaintiff contained FIVA’s name;
all payments to contractors for work at Plaintiff's properties were on FIVA checks; all of
Nunez’s e-mails identified Nunez as a FIVA officer; and all of Plaintiff's claims against
Nunez arise out FIVA’s renovation work at the two properties.
Taking these unopposed facts as true, the Court found no genuine issues of
material fact and granted Nunez summary judgment.
While the case has an unusual procedural posture, it remains valuable to see the
sorts of facts that can defeat an effort to pierce the corporate veil.Driscoll/Intech II v. Scarborough, August Term 2007, No. 1094, 2008 Phila. Ct. Com. Pl. LEXIS 33, 3 Pa. D. & C.5th 279 (C.C.P. Phila. Feb. 12, 2008) (Sheppard, J.) (no piercing the veil/alter ego pleaded where plaintiff failed to plead as to all required elements). This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/070801094.pdf.
This case involves the alleged failures of a surety (Scarborough), a risk
manager/claims administrator (IBCS), and bond collateral trustee (FMB) in connection
with a construction bond to the owner on a construction subcontract. The plaintiff owner
alleged not merely a breach of the subcontract (into which the other agreements merged),
and the bond, but allegedly fraudulent conduct in connection with the failure to perform
and pay. The surety, Scarborough, was CEO of the claims administrator, IBCS.
The plaintiff/owner sought to pierce the corporate veil between Scarborough and
IBCS. Defendants filed Preliminary Objections. The Court cited the following elements
that courts have considered in a piercing the veil claim: “1) undercapitalization, 2)
failure to adhere to corporate formalities, 3) substantial intermingling of corporate and
personal affairs, and/or 4) use of the corporate form to perpetrate a fraud.”20 All the
owner’s complaint alleged was that Scarborough used IBCS as a sham to create
fraudulent delays in meeting Scarborough’s obligations by having IBCS ask for
information Scarborough already had, and by seeking to investigate the facts surrounding
the alleged breach of the construction contract. There were no pleadings addressing the
other piercing factors, or going beyond these two limited allegations. Thus, plaintiff
“failed to meet the minimum threshold to allow [its] claim of alter ego/piercing the
corporate veil liability to go forward.” The Preliminary Objections were granted.BDO Seidman, LLP v. Kader Holdings Company, Ltd., May Term 2004, No. 973, 2005 WL 637450, 2005 Phila. Ct. Com. Pl. LEXIS 140 (C.C.P. Phila. Mar. 11 2005) (Jones, J.) (Court denied Plaintiff’s motion to compel the parent corporation to arbitrate because piercing the corporate veil doctrine, agency principles, third-party beneficiary principle, and doctrine of estoppel were invalid as applied). This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/040500973-03112005.pdf.
In BDO Seidman, the Court refused to pierce the corporate veil to compel a
parent company into arbitration pursuant to an agreement entered into by its subsidiary
and the Plaintiff. The Court concluded that Plaintiff could not establish that the parent
company controlled the subsidiary to the requisite extent.
Plaintiff BDO Seidman, LLP (“BDO”) is an auditing company that provided
services to Defendant Bachmann Industries, Inc. (“Bachmann”), a wholly-owned
subsidiary of Kader Industrial Company, Ltd. (“Kader”). BDO provided services to
20 Miller v. Brass Rail Tavern, 702 A.2d 1072, 1075 (Pa. Super. 1997).
Bachman for a series of years pursuant to engagement letters, which contained a dispute
resolution clause mandating a negotiation period followed by arbitration.
Bachmann, Kader, and other related entities allegedly engaged in an improper tax
planning scheme. The Internal Revenue Service determined that the scheme resulted in
the underpayment of withholding taxes for the 1997-1998 tax periods. Bachmann sought
damages from BDO for the taxes imposed. In accordance with the engagement letters,
Bachmann and BDO went to arbitration. BDO initiated this action to compel Kader to
participate in that arbitration, on the theory of piercing the corporate veil.
There is a strong presumption against piercing the corporate veil.21 There is no
precise test that determines when the corporate veil should be pierced.22 However, there
must be a strong showing of domination and control by the parent corporation.23 In order
for BDO to prevail, it must show that Kader dominated and controlled Bachmann to the
extent that Bachmann had “no separate mind, will, or existence of its own.”24 BDO had
to show that Bachmann did not possess a separate existence, but merely served as a
Furthermore, the corporate veil should only be pierced to prevent “fraud,
illegality or injustice, or when recognition of the corporate entity would defeat public
policy or shield someone from public liability for crime.”26
In its argument to compel Kader to participate in the arbitration, BDO established
21Lumax Indus., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893, 895 (Pa. 1995).22Good v. Holstein, 787 A.2d 426, 430 (Pa. Super. 2001).23See, e.g., Craig v. Lake Asbestos of Quebec, Ltd, 843 F.2d 145 (3d Cir. 1988); Pearson v. Component Tech. Corp., 80 F. Supp.2d 510 (W.D. Pa 1999); Garden State Tanning, Inc. v. Mitchell Mfg. Group, Inc., 55 F. Supp.2d 337 (E.D. Pa. 1999); Nazarewych v. Bell Asbestos Mines, Ltd., 19 Phila. 429 (C.C.P. Phila 1989). 24Nazarewych, 19 Phila. at 441.25Craig, 843 F.2d at 149.26Village at Camelback Property Owners Ass’n v. Carr, 538 A.2d 528, 533 (Pa. Super. 1988) , aff’d, 524 Pa. 330, 572 A.2d 1 (1990).
several important factors: Bachmann and Kader had several common directors; Kader
guaranteed Bachmann’s bank loans; Kader conceived and directed the tax planning
scheme; Bachmann did not issue a dividend; the highest ranking officer at Bachmann did
not attend its board meetings; and Bachmann almost only sold products supplied by
Kader. However, the Court determined that these factors, albeit significant, were not
dispositive. Kader demonstrated that Bachmann was a true company, and not a mere
conduit for Kader, by establishing these other factors: Bachmann had a minimum of 40
employees; Bachmann had its own headquarters, located far away from Kader;
Bachmann had its own officers, maintained its own records, developed its own retirement
plans, negotiated its own union, and received no working capital from Kader; and
Bachmann’s financial statements showed that it had a positive net worth for the period in
question. Thus, BDO could not establish that Kader controlled Bachmann to the requisite
Banks v. Hanoverian, Inc., January Term 2005, No. 2807, 2005 Phila. Ct. Com. Pl. LEXIS 287 (C.C.P. Phila. June 23, 2005) (Abramson, J.) (signing a contract on behalf of the breaching party is insufficient to support a corporate veil piercing claim).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/050102807.pdf.
In Banks v. Hanoverian, Inc., the Court granted Donald Metzger’s (“Metzger”)
demurrer because Robert Banks, Sr. (“Banks”) failed to set forth facts sufficient to aver a
cause of action under a piercing the corporate veil theory.
In the case at bar, Banks entered into a contract with Hanoverian, Inc.
(“Hanoverian”), which was signed by Metzger on Hanoverian’s behalf. Metzger was
Hanoverian’s CEO and sole shareholder.27 Banks claimed that Metzger should be liable
27Additional factual details can be found in the Court’s later opinion on summary judgment, Banks v. Hanoverian, Inc., January Term 2005, No. 2807, 2006 Phila. Ct.
for breach of contract under the theory of piercing the corporate veil. The Court applied
the Pennsylvania factors test to determine whether to allow piercing of the corporate
veil,28 and stated that “while it is not necessary to set forth the evidence by which facts
are to be proved, it is essential that the facts the pleader depends upon to show liability be
The Court found that Banks failed to plead the existence of a contract between
himself and Metzger through the theory of piercing the corporate veil. Banks grounded
Metzger’s liability on the single fact that Metzger personally signed the contract on
Hanoverian’s behalf. The Court held this fact alone was insufficient to pierce the
corporate veil, and sustained Metzger’s preliminary objections and dismissed the claim
In a footnote, the Court observed that is was mindful of the distinction between
piercing the corporate veil and the participation theory, as set forth in Wicks v.
Milzoco.29 While inapplicable to the breach of contract, unjust enrichment and premises
liability claims, the Court did recognize that the participation theory could potentially
apply to the Plaintiff’s fraud claim.30
Com. Pl. LEXIS 128 (C.C.P. Phila. March 10, 2006) (Abramson, J.), available at http://fjd.phila.gov/pdf/cpcvcomprg/050102807-031006.pdf.28As stated above, Pennsylvania courts look to the following factors to determine whether to pierce the corporate veil: (1) undercapitalization; (2) failure to adhere to corporate formalities; (3) substantial intermingling of corporate and personal affairs; and (4) use of the corporate form to perpetrate a fraud. Lumax Indus., 543 Pa. 38, 42, 669 A.2d 893, 895 (1995); Village at Camelback Prop. Owners Ass’n, Inc. v. Carr, 538 A.2d 528, 533 (Pa. Super. 1988), aff’d, 524 Pa. 330, 572 A.2d 1 (1990).29503 Pa. 614, 470 A.2d 86 (1983).30The fraud claim against Metzger was later dismissed on summary judgment.CGB Occupational Therapy Inc. v. Bala Nursing and Retirement Center, Ltd., April Term 2003, No. 1758, 2005 WL 280838, 2005 Phila. Ct. Com. Pl. LEXIS 19 (C.C.P. Phila Jan. 27, 2005) (Sheppard, J.) (Defendants’ motion for summary judgment granted in part and denied in part, concluding that piercing of corporate veil doctrine invalid as applied).
This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/030401758.pdf.
In CGB Occupational Therapy Inc., the Court refused to pierce the corporate veil.
It would not hold Defendant Philip Miller personally liable for claims against his three
Co-Defendants, Bala Nursing and Retirement Center (“Bala”), MDC Asset Management
Corp. (“MDC”) and the Center for Rehabilitative Therapies (“CRT”), based solely upon
an affidavit that stated Miller was either the President or CEO of the Defendant business
In December 1997, Plaintiff CGB and Defendant CRT entered into an agreement
whereby CGB agreed to manage CRT’s rehabilitation services, which Defendant CRT
had agreed to provide Defendant Bala. Plaintiff CGB was responsible for hiring
therapists who would work as CRT’s employees at Bala, but under CGB’s management.
Defendant CRT was to pay Plaintiff CGB recruitment fees for hiring the therapists.
In July 1998, CRT assigned to Bala all of its rights, interests and obligations in
the CGB agreement. In March 1999, Bala’s administrator gave notice to Plaintiff CGB
that Bala was terminating the management agreement, which CGB claimed violated the
agreement and apparently resulted in damages to Plaintiff. Plaintiff claims that a separate
harm was discovered in May 1999, when a CGB representative retrieved equipment from
Bala. CGB claimed this equipment was unacceptable for reuse, and that there had been a
improper substitution of inferior equipment for the equipment that CGB supplied to Bala.
Miller was the CEO or President of all the Defendant entities. Plaintiff CGB
argued that the corporate veil must be pierced to hold Miller personally liable for the
alleged acts of CRT, MDC, and Bala, including claims for breach of contract, fraud and
conversion, among others. In Pennsylvania, there is a strong presumption against piercing
the corporate veil.31 The following factors are to be considered: (1) undercapitalization;
(2) failure to adhere to corporate formalities; (3) substantial intermingling of corporate
and personal affairs; and (4) use of the corporate form to perpetuate a fraud.32
In arguing against Miller’s summary judgment motion, Plaintiff relied solely on
Miller’s affidavit to support its piercing the corporate veil claim. In his affidavit, Miller
had stated that he was either the CEO or the President of all the Defendant entities.
Plaintiff argued that Miller’s status alone could establish that these businesses were
merely an instrumentality of Miller; however, Miller’s affidavit only established that he
held these executive positions with the Defendant entities. The Court found that this
alone failed to provide sufficient evidence to support Miller’s personal liability. Thus,
the Court granted Miller summary judgment on this claim.33
31Lumax Indus., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893, 895 (1995).32JK Roller Architects, LLC v. Tower Investments, Inc., July Term 2002, No. 02778, 2003 Phila. Ct. Com. Pl. LEXIS 40 (C.C.P. Phila. Mar. 17 2003) (Jones, J.), discussed immediately below. 33In its Complaint, Plaintiff had pleaded more extensively, upon information and belief, gross under capitalization, failure to observe corporate formalities, no regular payment of dividends, siphoning funds, no functioning officers or directors, inadequate record keeping and that the corporations were “facades” for their principals’ operations. Apparently, no facts adduced during discovery supported these averments and Miller’s affidavit was the sole evidence offered on the claim.JK Roller Architects, LLC v. Tower Investments, Inc., July Term 2002, No. 02778, 2003 WL 1848101, 2003 Phila. Ct. Com. Pl. LEXIS 40 (C.C.P. Phila. Mar. 17 2003) (Jones, J.) (Court sustained Defendants’ preliminary objections relating to piercing the corporate veil because Plaintiffs failed to plead sufficient facts). This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/jkroller303.pdf.
The Court in JK Roller Architects dismissed Plaintiff’s claims against an
individual because the Plaintiff failed to plead sufficient facts to state a claim against that
person under a theory of piercing the corporate veil.
Plaintiff JK Roller Architects, LLC (“JK Roller”) brought a breach of contract
claim against Tower Investments, Inc. (“Tower”), Delaware 1851 Associates, LP
(“1851”), Northern Liberties Development, LP (“NLD”), Reed Development Associates,
Inc. (“RDA”), and Bart Blatstein (“Blatstein”). The instant action arose out of seven
separate contracts for architectural services between Plaintiff and several of the
Plaintiff averred that Blatstein was the dominant owner who controlled Tower,
which in turn controlled 1851, NLD and RDA. Plaintiff claimed that Blatstein used these
entities as his alter egos. Plaintiff asserted that Blatstein wholly ignored the separate
status of these entities, routinely held himself out as Tower, and dominated and
controlled these entities so that the separate existence of each entity was merely a sham.
The Court started its piercing the corporate veil analysis by stating that there is a
strong presumption in Pennsylvania against disregarding the corporate form.34 Courts
must begin with the general rule that the corporate entity should be upheld unless specific
and unusual circumstances call for the exception of piercing the corporate veil.35 The
following factors are to be considered in determining whether to pierce the corporate veil:
34Wedner v. Unemployment Comp. Bd. of Review, 296 A.2d 792, 794 (Pa. 1972).35First Realvest, Inc. v. Avery Builders, Inc., 600 A.2d 601, 604 (Pa. Super. 1991).
(1) undercapitalization; (2) failure to adhere to corporate formalities; (3) substantial
intermingling of corporate and personal affairs; and (4) use of the corporate form to
Plaintiff failed to meet the burden of averring facts in its complaint to show
Blatstein’s liability. Blatstein’s name was mentioned in only three paragraphs of the
complaint, which had twenty-one counts. Plaintiff referred to Blatstein and Tower
collectively as “Tower,” and lumped the claims against Blatstein with those brought
against Tower. The Court stated that Plaintiff must assert specific claims against
Blatstein to satisfy Pennsylvania’s fact pleading requirements. Furthermore, the
averments in the complaint relating to Blatstein’s alleged liability under the “alter ego”
theory were conclusions of law, and were insufficient to sustain the cause of action.
Thus, the Court concluded that the Plaintiff has failed to plead sufficient facts to state a
claim against Blatstein under the theory of piercing the corporate veil.
The Court also briefly considered the participation theory. The participation
theory “imposes personal liability on corporate officers or shareholders where they have
personally taken part in the actions of the corporation.”37 However, the Plaintiff asserted
no facts that would support a participation theory claim.
36Lumax Indus., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893 (Pa. 1995); Village at Camelback Prop. Owners Ass’n, Inc. v. Carr, 538 A.2d 528, 533 (Pa. Super. 1988), aff’d, 524 Pa. 330, 572 A.2d 1 (1990).37Wicks v. Milzoco Builders, Inc., 503 Pa. 614, 621 (1983).Kevin D. Flynn Development Corp. v. Corporate Express Office Products, Inc., July Term 2005, No. 3523, 2006 Phila. Ct. Com. Pl. LEXIS 50 (C.C.P. Phila. Jan. 19, 2006) (Sheppard, J.)(the Court granted the defendant’s demurrer for failure to offer facts to establish a cause of action under the theory of piercing the corporate veil).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/050703523.pdf.
In Kevin D. Flynn Development Corp., the Court granted CE Philadelphia Real
Estate, Inc.’s (“CEPRE”) demurrer against Kevin D. Flynn Development Corporation
(“Flynn”) for failing to set forth facts sufficient to plead a cause of action. Flynn claimed
that CEPRE should be liable for breach of contract under the theory of piercing the
On or about March 18, 2003, Flynn entered into an agreement of sale with
Corporate Express Office Products (“Corporate”). The agreement gave Flynn the
exclusive right to sell the property, and a six percent commission for producing a buyer.
Flynn pleaded that it produced a ready, willing and able buyer, but that Corporate did not
pay the six percent commission as contracted. Flynn claimed that CEPRE was liable for
breach of contract because CEPRE was the registered owner/seller of the property within
the agreement of sale, and that Corporate was the putative owner. The Court granted
CEPRE’s demurrer for Flynn’s inability to set forth facts establishing liability under the
theory of piercing the corporate veil.
In order to withstand a demurrer, a plaintiff must set forth sufficient facts to
establish a defendant’s liability under the theory of piercing the corporate veil. The Court
applied the Pennsylvania factors test to determine whether to pierce the corporate veil.38
The Court further stated that “[w]hile it is not necessary to set forth the evidence by
which facts are to be proved, it is essential that the facts the pleader depends upon to
38See Lumax Industries, Inc. v. Aultman and Village at Camelback Prop. Owners Ass’n, Inc., supra at footnote 18.
show liability be averred.”39 The Court dismissed the claim to pierce the veil because the
Complaint was devoid of facts that could even potentially make out such a claim.
Tunnell-Spangler & Associates, Inc. v. Katz, May Term 2003, No. 3030, 2003 Phila. Ct. Com. Pl. LEXIS 79 (C.C.P. Phila. Dec. 31, 2003)(Cohen, J.) (the Court applied the Pennsylvania factors to sustain the Defendant’s demurrer).Opinion available at http://fjd.phila.gov/pdf/cpcvcomprg/tunnell-spangler-op.pdf.
In Tunnell-Spangler & Associates, Inc., the Court held that the corporate veil
could not be pierced because Tunnell-Spangler & Associates (“Plaintiff”) merely alleged
conclusions of law, and not the special circumstances necessary to pierce the corporate
veil. The Court applied the Pennsylvania factors test to determine whether to allow the
The Plaintiff and Entersport Capital Advisors, Inc. (“Entersport”) entered into a
contract in which Samuel P. Katz (“Katz”) was not a named party. (Entersport and Katz
are hereinafter collectively referred to as the “Defendants”) Plaintiff brought a breach of
contract suit naming both Entersport and Katz as Defendants. Katz file preliminary
objections on the basis that he was improperly named as a Defendant in the action.
A demurrer can only be sustained where the complaint is clearly insufficient to
establish the pleader’s right to relief.40
Although “all well-pleaded material, factual
averments and all inferences fairly deducible there from” are presumed to be true,
pleader’s conclusions or averments of law are not considered to be admitted as true.41 In
order to withstand a demurrer, a plaintiff must set forth conduct which the defendant
39Frey v. Dougherty, 286 Pa. 45, 48, 132 A. 717, 718 (1926)).40JK Roller Architects. L.L.C. v. Tower Investments, Inc., September Term 2002, No. 2778, 2003 WL 1848101, slip op. at page 1 (C.C.P. Phila. March 17, 2003)(Jones, J.) available at http://fjd.phila.gov/pdf/cpcvcomprg/jkroller303.pdf
Storiazzi, 729 A.2d 1206, 1211 (Pa. Super. 1999)).41Tucker v. Philadelphia Daily News, 757 A.2d 938, 941-42 (Pa. Super. 2000).
allegedly engaged in that would bring his actions within the parameters of a cause of
action based on a theory of piercing the corporate veil. Although it is not necessary to set
forth the evidences to be proved, the pleader must present facts which show the liability
The complaint alleged that: (1) the Defendants assured the Plaintiff that
Entersport and Katz were one and the same, and that Entersport was the corporate name
Katz used to initiate the project; (2) Katz was the principal owner of Entersport, and had
a significant personal financial interest in the success of the project; and (3) Katz was
The Court determined that the Plaintiff did not aver the special circumstances
necessary to pierce the corporate veil such as fraud, illegality or injustice – that the
averments were merely conclusions of law – and therefore dismissed the claims asserted
against Katz. However, the dismissal was without prejudice, and Plaintiff was given
leave to amend its claims against Katz. As discussed immediately below, the amended
claims were ultimately dismissed as well.Tunnell-Spangler & Associates, Inc. v. Katz, May Term 2003, No. 3030, 2004 Phila. Ct. Com. Pl. LEXIS 33 (C.C.P. Phila. July 15, 2004) (Cohen, J.) (the Court held the Plaintiff’s amended complaint to be insufficient to pierce the corporate veil).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/030503030.pdf.
Tunnell-Spangler & Associates (“Plaintiff”) brought a Complaint against
Entersport Capital Advisor’s Inc. (“Entersport”) and Samuel P. Katz. The claims against
Entersport were ordered to mediation and arbitration. As set forth immediately above,
claims against Katz were dismissed with leave to amend those claims. After the Court
granted Plaintiff leave to amend its claims against Katz, Plaintiff filed its third amended
42Lumax Industries, Inc., supra, 669 A.2d at 895.
complaint against Katz only. The Court sustained Katz’s preliminary objections because
the Plaintiff’s allegations were legally insufficient to impose alter ego liability upon Katz
The amended complaint alleged that Katz breached his contract with the Plaintiff,
and that he should be liable for the debt because he was Entersport’s alter ego. In support
of the corporate veil piercing theory, the amended complaint alleged the following:
1. Katz caused Entersport to be uncapitalized or undercapitalized for its
corporate purpose and activities, and that any capitalization was provided by Katz from his personal assets;
2. Katz intermingled substantial assets of Entersport with his personal
assets and used the assets of Entersport as his own;
3. Katz was the sole shareholder, director and officer of Entersport;4. Katz failed to maintain the corporate books and records of Entersport;5. Katz failed to adhere to corporate formalities;6. Katz engaged in business activities on behalf of Entersport by
personally acknowledging its claims and paying claims made against Entersport by creditors who were similarly situated;
7. Katz employed the corporate entity of Entersport to defraud Plaintiff
by promising in the contract to pay the balance of the consideration due to Plaintiff when Katz knew that Entersport was undercapitalized and knew that it was likely that Entersport would not be awarded the contract;
8. Katz assured Plaintiff that Entersport and Katz were one and the same,
and that Entersport was the corporate name Katz was using to initiate the project;
9. Katz was the principal owner of Entersport;10. Katz had a significant personal financial interest in the success of the
11. Katz assured Plaintiff that he would be involved in the project every
step and would stand 100 percent behind the project; and
12. That as a result of Katz’s assurances the Plaintiff signed a contract
with Entersport to provide architectural services.
In Pennsylvania, shareholders, officers and directors are not held liable for the
corporation’s breach of contract, unless liability is premised on the theory of piercing the
corporate veil.43 The Court applied the Pennsylvania factors test with respect to the
The Plaintiff’s allegations were legally insufficient to impose liability on Katz for
Entersport’s debt. The Court determined that although the allegations of
undercapitalization, intermingling of funds, and failure to adhere to corporate formalities
alleged control and alter ego status, the complaint failed to allege how that control and
alter ego status were used by the Defendant to further his personal interest. The Court
further stated that the complaint contained no allegations averring that Katz agreed to
pay, gave a personal guarantee, or agreed to be personally liable in the event Entersport
did not pay the consideration. Furthermore, there were no allegations that Katz made any
payments on Entersport’s behalf. Therefore, the Court held that the Plaintiff’s allegations
were insufficient to successfully plead a corporate veil piercing claim.Validation Commerce, LLC v. NGRAVIS, March Term 2004, NO. 07272, 2004 Phila. Ct. Com. Pl. LEXIS 76 (C.C.P. Phila. August 28, 2004) (Cohen, J.) (holding that the Plaintiff failed to plead sufficient facts to sustain liability under the theory of piercing the corporate veil).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/040307272.pdf.
Validation Commerce, LLC (“Validation”) filed suit against nGravis, Bryan
Yingst (“Yingst”), Justin Staufer (“Staufer”), and Donald Reynolds (“Reynolds”) for
breach of contract and breach of warranty. Yingst, Staufer and Reynolds (collectively the
“Defendants”) raised preliminary objections asserting that the Defendants could not be
held liable because: (1) Defendants were not parties to the agreement at issue; and (2)
Validation’s pleadings were insufficient to pierce the corporate veil. The Court
43First Realvest, Inc. v. Avery Builders, Inc., 600 A.2d 601, 603 (Pa. Super. 1991) (citing Loeffler v. McShane, 539 A.2d 876 (Pa. Super. 1988)).44See Lumax Industries, Inc. v. Aultman and Village at Camelback Prop. Owners Ass’n, Inc., supra at footnote 18.
concluded that the pleadings were insufficient and dismissed the claims against the
Validation entered into a Master Consulting Services Agreement (“Agreement”)
with the nGravis. Bryan Yingst, who signed the Agreement on behalf of nGravis as an
“Internet Consultant” was the only one of the Defendants to be mentioned within the
Agreement. The main issue was whether Validation set out material, relevant, well-
pleaded facts which, if true, stated a claim against the Defendants under the theory of
piercing the corporate veil. To determine whether to pierce the corporate veil, the Court
In the case at bar, Validation failed to meet its burden. The complaint had averred
that each Defendant was an adult individual with “the actual or apparent authority to act
on behalf of all the Defendants,” including nGravis. The Court held that such pleadings
were insufficient to maintain a cause of action based on the theory of piercing the
corporate veil, and sustained the Defendants’ preliminary objections.Eisen v. Independence Blue Cross, Aug. Term 2000, No. 2705, 2002 Phila. Ct. Com. Pl. LEXIS 63 (C.C.P. Phila. May 6, 2002) (Herron, J.) (claiming the Defendants operate as a single entity is insufficient to pierce the corporate veil through the alter ego theory).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/eisen502.pdf.
In Eisen v. Independence Blue Cross, the Plaintiffs asserted liability over the
named Defendants for breach of contract, relying on the alter ego theory to pierce the
corporate veil against certain parties where there was no contractual privity. The Court
held that the Plaintiffs did not present sufficient evidence to ground a claim on the alter
45See Lumax Industries, Inc. v. Aultman, and Village at Camelback Prop. Owners Ass’n, Inc., supra at footnote 18.
ego theory, and therefore granted summary judgment in favor of four of the six
The relationship between the parties consists of a series of contracts between
health insurance companies and their subsidiaries, health insurance subscribers and
healthcare providers and doctors. The two named subscriber plaintiffs, Deborah A. Carl
and Sally Ann Spall, each held Personal Choice health care plans through a subsidiary of
Independence Blue Cross (“IBC”). The named provider plaintiffs, Steven C. Eisen, Alice
E. Wright, Douglas G. Pfeiffer and John Cecchini, all testified that they treated patients
using IBC, AmeriHealth Administrators and Keystone Health Plan East.
The moving Defendants46 argued that the Plaintiffs could not establish breach of
contract claims against them because contractual privity was lacking. The Plaintiffs
recognized that apparent fact, instead relying on the alter ego theory to establish privity.
The Court stated that, typically, a parent corporation is not liable for the contractual
obligations of its subsidiaries, and “[s]uch liability occurs only by application of the ‘alter
ego’ theory to pierce the corporate veil.”47
against piercing the corporate veil, the corporate veil can be pierced “when the court must
prevent fraud, illegality, or injustice, or when recognition of the corporate entity would
defeat public policy or shield someone from liability for a crime.”48 The Court stated that
the use of the alter ego theory “is applied only in special and unusual circumstances to
46AmeriHealth, Inc., AmeriHealth Integrated Benefits, Inc. f/k/a American Health Alternatives, AmeriHealth Administrators, Inc., Healthcare Delaware, Inc., Vista Health Plan, Inc., and Keystone Health Plan East, Inc.47Norbers v. Crucible, Inc., 602 F. Supp. 703, 706 (W.D. Pa. 1985). See alsoCommonwealth v. Vienna Health Prods., Inc., 726 A.2d 432, 434 (Pa. Commw. 1999); Shared Communications, Servs. Of 1800-80 JFK Blvd., Inc. v. Bell Atlantic Prods., Inc., 692 A.2d 570, 573 (Pa. Super. 1997).48Lumax Indus., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893, 895 (1995).
reach the parent corporation which wholly controls the subsidiary and ignores corporate
formalities or it is applied to the principal owner/shareholder.”
The Plaintiffs asserted that the corporate veil should be pierced solely because
IBC and all of the named Defendants operated as a single entity. However, the Plaintiffs
were only able to present evidence of their relationship and dealings with IBC,
AmeriHealth Administrators and Keystone Health Plan East,49 and no evidence was
presented of any contractual relationship between any of the named Plaintiffs and
AmeriHealth, Inc., AmeriHealth Integrated Benefits, Inc. f/k/a American Alternatives,
Healthcare Delaware, Inc. or Vista Health Plan Inc. (“non-contractual Defendants”).
Therefore, the Court determined that this was not the unusual case in which to ignore the
corporate form, and held that the Plaintiffs’ evidence was insufficient to establish the
Plaintiffs’ standing to sue the non-contractual Defendants.Koch v. First Union Corporation, May Term 2001, No. 0549, 2002 WL 372939, 2002 Phila. Ct. Com. Pl. LEXIS 82 (C.C.P. Phila. Jan. 10 2002) (Herron, J.) (Court sustained Defendants’ preliminary objections relating to dismissal of the bank’s parent company due to Plaintiffs’ lack of alleged facts to pierce the corporate veil). This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/kochpo1.pdf.
The Court in Koch determined that Plaintiffs could not pierce the veil to reach the
parent corporation because they did not allege facts legally sufficient to establish the
Plaintiffs were homeowners. Defendant Pennsylvania Resource Corporation
(“PRC”) was a contractor that provided home repairs and home improvement financing
through its broker, Defendant First Liberty Financial Services, Inc. (“First Liberty”).
Plaintiffs, through PRC and First Liberty, obtained home equity loans from Defendant
49Eisen, Wright, Pfeiffer, and Cecchini, each testified that they had treated patients using IBC, AmeriHealth Administrators and Keystone Health Plan East.
First Union National Bank of Delaware (“FUNBD”). FUNBD was a subsidiary of
Defendant First Union Corporation (“First Union”). Plaintiffs alleged that all of the
Defendants worked together to secure home equity loans on the basis of misleading
"good faith cost estimates.” Plaintiffs also alleged, among other matters, that FUNBD
and its parent, First Union, were liable for the high closing costs associated with the
Plaintiffs argued that First Union could be held liable because First Union
“appear[ed] to dominate FUNBD in such a manner that their separate corporate entities
may be disregarded.” First Union, a bank holding company, argued that since it was not
a state chartered bank nor a national bank association, it lacked the capacity to be sued
with respect to these loans. It further argued that it was misjoined as a Defendant
because the Plaintiffs failed to allege facts sufficient to pierce the corporate veil. The
Court agreed with First Union that Plaintiffs did not allege sufficient facts to pierce the
corporate veil and proceed against First Union.
A parent corporation must be treated as a separate entity from a subsidiary, unless
circumstances justify piercing the corporate veil.50
corporate form to be disregarded in situations where there is gross undercapitalization,
failure to adhere to corporate formalities, substantial intermingling of personal and
corporate affairs, and the use of the corporate form to perpetrate a fraud.51 In applying
these standards, courts must start from the general rule that the corporate entity should be
recognized and upheld, unless specific and unusual circumstances call for the
50Matter of Chrome Plate, 614 F.2d 990, 996 (5th Cir.), cert. denied, 449 U.S. 842 (1980). 51Saint Joseph Hospital v. Berks County Bd. of Assessments, 709 A.2d 928 (Pa. Commw. 1998).
exception.52 Furthermore, there is a strong presumption against piercing the corporate
The Court, in the instant case, refused to pierce the corporate veil because
Plaintiffs did not allege that First Union engaged in gross undercapitalization, failed to
adhere to corporate formalities, substantially intermingled personal and corporate affairs,
or used the corporate form to perpetrate a fraud. Absent these allegations, the Court
determined that Plaintiffs could not proceed against First Union. In their complaint,
Plaintiffs merely alleged that First Union “appear[ed] to dominate FUNBD in such a
manner that their separate corporate entities may be disregarded.” The Court stated that
this was insufficient to pierce the veil. Thus, the Court sustained First Union’s
preliminary objections and dismissed all counts as to First Union because the Plaintiffs
would be “unable to prove facts legally sufficient to establish First Union’s liability.”
First Union Nat'l Bank v. Quality Carriers, Inc., April Term 2000, No. 2634, 48 Pa.D. & C.4th 1 (C.C.P. Phila. October 10, 2000) (Sheppard, J.) (no basis to pierce the corporate veil against parent company). This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/1st-op.pdf.
Among other claims, this case involved shareholder claims against a successor
corporation in a merger. The successor corporation, Quality Carriers, Inc. (“Quality
Carriers”), was created as the result of a merger with a holding company, Chemical
Leaman Corporation (“CLC”), which held all of the stock of Chemical Leaman Tank
Lines, Inc. (“CLTL”). The shareholders alleged that under an earlier agreement, they
became shareholders of preferred stock in CLC and entered consulting agreements with
CLTL. The issue of piercing the corporate veil arose in the context of an alleged breach
52Wedner v. Unemployment Comp. Bd. of Review, 296 A.2d 792, 794-95 (Pa. 1972).53Lumax Indus., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893 (1995).
of these consulting agreements, the Court having rejected the averment that Quality
Carriers absorbed and controlled CLTL as adequate to set out a claim that it was CLTL’s
successor (especially where CLTL was named as a separate Defendant).
First, the Court observed that the Plaintiffs had no contract with Quality Carriers/
CLC, but only with CLTL; and a parent corporation and its wholly owned subsidiary are
legally distinct, even where they may share common goals. The presumption is against
piercing the corporate veil, which only applies in narrow circumstances where the
corporate form is being used “’to defeat public convenience, justify wrong, protect fraud
or defend crime,’ … “and only after considering such factors as ‘undercapitalization,
failure to adhere to corporate formalities, substantial intermingling of corporate and
personal affairs and use of the corporate form to perpetrate a fraud.’”
Plaintiffs failed to meet their burden and preliminary objections were sustained on
this claim. Here, neither Quality Carriers nor CLC was a party to the Consulting
Agreements. There was only one possible basis for piercing the corporate veil, based on
fraud allegations made in an earlier count. However, that fraud claim did “not involve
the use of the corporate form, as is required to pierce the corporate veil.”
Academy Electrical Contractors, Inc. v. Nason and Cullen Group, Inc., July Term 2001, No. 3252, 2004 WL 95181, 2004 Phila. Ct. Com. Pl. LEXIS 77 (C.C.P. Phila. Jan. 14 2004) (Sheppard, J.) (piercing the corporate veil claim failed in light of Plaintiff’s acquiescence that there was a merger). This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/academy_sj_denied_granted_order_memorandum.pdf.
In Academy Electrical Contractors, Inc., the Court dismissed Plaintiff’s piercing
the corporate veil claim where Plaintiff presented no evidence to support such a claim.
In 1998 and 1999, Defendant Nason and Cullen, Inc. (“NCI”) entered into
separate construction contracts with each of the following entities, which were also
named Defendants: Drexel University (“Drexel”), Crozer-Chester Medical Center
(“Crozer-Chester”) and Lippincott Williams & Wilson, Inc. (“Lippincott”). For each
project, NCI entered into a separate subcontract with Plaintiff Academy Electrical
Contractors, Inc. (“Academy”) for Academy’s services. Academy claimed that it was not
paid for certain work which it performed both under and outside of the subcontracts.
Academy asserted that Nason and Cullen Group, Inc. (“NCG”) should be held liable for
NCI’s debts under the piercing of the corporate veil theory, among others claims.
Defendants asserted that NCG merged with NCI on or about March 31, 2002,
which resulted in the transfer of all of NCG’s assets and liabilities to NCI, well after the
contract at issue. The Court found that Plaintiff did not proffer or discover any evidence
to support its claim to pierce NCG’s corporate veil. In fact, Academy apparently
acquiesced in Defendants argument that a merger occurred by: (1) failing to argue to the
contrary in its brief, or by presenting any evidence to support a claim for piercing the
corporate veil; and (2) accepting, without refutation, NCI’s document submission
establishing the merger. With the merger unrefuted, the premise for piercing the
corporate veiled was absent, and the Court found in favor of Defendants on this claim.Advanced Surgical Services, Inc. v. Innovasive Devices, Inc., August Term 2000, No. 1637, 2001 Phila. Ct. Com. Pl. LEXIS 127 (C.C.P. Phila. Nov. 8, 2001) (Herron, J.)54(the Court found successor liability inapplicable where a parent company was not the successor, and that to permit such a claim would eviscerate the requirements of piercing the corporate veil).
In Advanced Surgical Services, the Court refused to impose successor liability on
a parent company because it would essentially require piercing the corporate veil without
a finding of fraud, injustice or any other conduct required to justify doing so.
54The Opinion found on the Commerce Court website with this date addresses a motion for reconsideration of this Opinion.
Defendant Innovasive Devices, Inc. (“Innovasive”) and Plaintiff Advanced
Surgical Services, Inc. (“ASSI”) entered into a three-year agreement. Under the
agreement, ASSI would serve as an Innovasive sales representative, receiving
commissions on invoice sales. Additionally, Innovasive would provide ASSI a monthly
allowance of $2,000 for ASSI to hire a sales sub-agent. The agreement included a buy-
out provision in the event of a change in control over Innovasive. In those circumstances,
the acquiring entity would have the option either to continue the agreement with ASSI, or
to make a buy-out payment to ASSI and terminate the agreement.
Defendant Mitek Products (“Mitek”) acquired Innovasive by incorporating Raptor
Acquisition Corp. (“Raptor”) as a wholly owned subsidiary, and merging it into
Innovasive. Mitek chose to terminate the agreement with ASSI, but allegedly failed to
make the full buy-out payments to ASSI as required under the buy-out provision in the
ASSI-Innovasive agreement. ASSI further alleged that Mitek’s agents attempted to
induce ASSI customers not to place orders until a time after which Defendants would not
have to pay ASSI an otherwise required commission. ASSI brought claims against
Defendants for breach of contract, interference with contractual relations, defamation,
Plaintiffs sought to impose successor liability on Mitek, as the parent of the
wholly owned subsidiary which merged with Innovasive. The Court stated that if
Plaintiffs were seeking to impose liability on Raptor, then successor liability would be
appropriate; however, Plaintiffs were attempting to recover from Mitek, the parent of that
successor corporation, as if the parent were automatically liable for the subsidiary’s acts.
55ASSI agent Robert Morris also was a Plaintiff in all but the breach of contract and conspiracy claims.
Essentially, Plaintiffs were seeking to obtain the results of piercing the corporate veil, but
without any evidence of fraud, injustice or other conduct that could meet the strictures of
piercing the corporate veil. Therefore, the Court concluded that successor liability was
inapplicable; though it found that Mitek could be liable to ASSI for the buy-out payment
if there was an implied-in-fact contract.
In a footnote, the Court discussed the requirements to pierce the corporate veil. In
Pennsylvania, “a corporation is to be treated as a separate and independent entity even if
its stock is owned entirely by one person.”56 Thus, there is a strong presumption against
piercing the corporate veil.57 A Pennsylvania court will pierce the corporate veil “only in
limited circumstances when used to defeat public convenience, justify wrong, protect
fraud or defend crime,”58 and only after considering such factors as “undercapitalization,
failure to adhere to corporate formalities, substantial intermingling of corporate and
personal affairs and use of the corporate form to perpetrate a fraud.”59
Webpro, Inc. v. International Lithographing, Inc., June Term 2001, No. 070015, 2001 WL 1808027, 2001 Phila. Ct. Com. Pl. LEXIS 77 (C.C.P. Phila. July 20, 2001) (McInerney, J.) (the Court set aside a writ of execution that would allow Plaintiff to recover from Defendant’s parent company by a foreign judgment against Defendant because this method of piercing the corporate veil violated due process). This Opinion is available at http://courts.phila.gov/pdf/opinions/civiltrial/webpro-03362.pdf.
In Webpro, the Court set aside a writ of execution that Plaintiff served upon the
parent company of a corporation against whom Plaintiff obtained a judgment in an
Illinois court. The Court refused to allow Plaintiff to pierce the corporate veil without
56Commonwealth v. Vienna Health Products, Inc., 726 A.2d 432, 434 (Pa. Commw. 1999).57Lumax Indus., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893, 895 (Pa. 1995).58Kiehl v. Action Mfg. Co., 535 A.2d 571, 574 (Pa. 1987).59Lumax Indus., Inc., 669 A.2d at 895.
Plaintiff, Webpro, Inc. (“Webpro”), obtained an Illinois judgment against
Defendant International Lithographing, Inc. (“International Lithographing”). Webpro
transferred the Illinois judgment to Pennsylvania pursuant to Pennsylvania’s Uniform
Enforcement of Foreign Judgment Act. Webpro filed a praecipe to issue a writ of
execution. Although the writ was issued against International Lithographing, Webpro
believed that International Lithographing’s parent company, Taconic Direct Acquisition
Corporation (“Taconic”), had operated in such a way as to allow Webpro to pierce the
corporate veil and recover directly against Taconic. Thus, Webpro served the writ on
Taconic’s garnishee to reach Taconic’s bank accounts.
The Court rejected the garnishment procedure because it would only allow for
post-deprivation review, which violated Taconic’s federal due process rights. Citing
National Stabilization Agreement of the Sheet Metal Industry Trust Fund v. Evans,60 the
Court observed that the following procedural protection would satisfy due process:
An affidavit should be required clearly setting forth the factual basis for the conclusion that the garnishment defendants are alter egos of the judgment debtors. This affidavit should be presented to an official with competence to evaluate the claim and discretion to deny the writ. The writ should issue only if on its face probable cause exists for accepting its conclusion. Plaintiff should post bond toindemnify the defendant for a mistaken taking. Finally, an immediate post attachment hearing should take place where plaintiff would be required to prove the existence of an alter ego relationship.
The Court concluded that Taconic’s federal constitutional due process rights had been
violated, and thus the writ of execution was set aside and dissolved. However, the Court
6071 F.Supp.2d 427, 430 (M.D. Pa. 1999).
added in a footnote: “An existing, constitutionally acceptable method of piercing the
corporate veil to reach Taconic’s funds would be to sue on the foreign judgment.”61
Commonwealth of Pennsylvania v. BASF Corporation, March Term 2001, No. 3127, 2001 WL 1807788, 2001 Phila. Ct. Com. Pl. LEXIS 95 (C.C.P. Phila March 15, 2001) (Herron, J.) (the Court sustained Defendants’ preliminary objections in part, concluding that piercing the veil doctrine was inapplicable).This Opinion is available at http://fjd.phila.gov/pdf/cpcvcomprg/basfop.pdf.
In BASF Corporation, the Court refused to apply the piercing the corporate veil
doctrine to Plaintiff’s breach of contract claim where the parent corporation was not a
party to the disputed contract. However, the Court did permit a civil conspiracy claim to
proceed because of the alleged lack of an alter ego relationship between parent and
Defendant BASF Corporation (“BASF”) was the parent company of Defendant
Knoll Pharmaceutical Company (“Knoll”). Knoll was the successor to Boots
Pharmaceuticals, Inc. (“Boots”) through merger, which itself was the successor to Flint
Flint had developed and manufactured the drug Synthroid. The Commonwealth
alleged that certain misrepresentations were made by Boots and Knoll (and various
individuals connected to them) concerning Synthroid’s unique and exclusive nature; and
that improper actions were taken to hide the fact that there were equivalent drugs to treat
the same problems that Synthroid addressed. This was allegedly done to prevent
Synthroid’s market share from dropping, if physicians and consumers realized that there
were equivalent drugs that could be purchased less expensively than Synthroid. The
Commonwealth allegedly paid for Synthroid prescriptions through various programs,
which programs would have required greater co-pays by individuals if equivalent drugs
other than Synthroid were prescribed. Thus, the Commonwealth claimed that it paid
more than it otherwise would have paid if Defendants had not convinced Pennsylvania
physicians to specify Synthroid in their prescriptions, and persuaded patients to request it.
Among other claims, the Commonwealth asserted breach of contract claims
against Defendants based upon a rebate agreement with Knoll. BASF (Knoll’s parent)
and various individuals named as Defendants were not parties to that contract.62 The
Court stated that a parent corporation is not normally liable for the contractual obligations
of its subsidiary, even if the subsidiary is wholly-owned.63 The parent company’s liability
can only exist when the alter ego theory is applied to pierce the corporate veil64; however,
there is a strong presumption against piercing the corporate veil,65 and a court will only
do so when it “must prevent fraud, illegality, or injustice, or when recognition of the
corporate entity would defeat public policy or shield someone from liability for a
In this case, the Court found that the Commonwealth did not set forth any
allegations that would compel the Court to pierce the corporate veil, and the demurrer
was granted. Moreover, the Court observed that the Commonwealth’s civil conspiracy
62The Court would not find these individuals liable because a corporation can only act through its agents, and if they are acting within the scope of their employ, and the nature of their agency is disclosed, they cannot be held liable for the corporation’s contractual obligations. Daniel Adams Associates, Inc. v. Rimbach Publishing, Inc., 360 Pa. Super. 72, 79, 519 A.2d 997, 1000-01 (1987). In this case, there was no allegation that these individuals acted outside the scope of their employment; however, they were subject to claims for civil conspiracy based upon allegations of their roles in the alleged fraudulent and deceptive conduct, along with that of the corporate Defendants.63Norbers v. Crucible, Inc., 602 F. Supp. 703, 706 (W.D. Pa. 1985).64Commonwealth v. Vienna Health Prods., Inc., 726 A.2d 432, 434 (Pa. Commw. 1999).65Lumax Indus., Inc., 669 A.2d at 895.66Id.
claim depended upon BASF and Knoll being distinct entities that could legally conspire
with each other, even though parent and subsidiary67; a claim as to which the Court
permitted the Commonwealth to proceed. Thus, the same allegations that supported the
civil conspiracy count undermined the piercing the corporate veil claim.PARTICIPATION THEORYHemispherx Biopharma, Inc. v. Asensio, July Term 2000, No. 3970, 2002 WL 31387765, 2002 Phila. Ct. Com. Pl. LEXIS 72 (C.C.P. Phila Oct. 22, 2002) (Sheppard, J.), aff’d, 855 A.2d 141 (Pa. Super. 2004) (without opinion), appealdenied, 583 Pa. 673, 876 A.2d 396 (2005) (While dismissing a veil piercing argument against one party prior to trial, the Court granted Plaintiffs’ motion for a new trial on its claims for defamation and commercial disparagement against an individual Defendant based on the participation theory).This Opinion is available at http://courts.phila.gov/pdf/cpcvcomprg/he-apl-o.pdf.
In Hemispherx Biopharma, the Court determined that the issue of an individual
Defendant’s personal liability properly went to the jury because there was evidence that
he personally took part in the commission of the alleged tort.
Plaintiff Hemispherx Biopharma, Inc. (“HBI”) was engaged in the business of
researching, developing, and testing experimental pharmaceutical compounds and drug
technologies. HBI was a publicly traded company. Defendant Asensio & Company, Inc.
(“ACI”) was a registered broker and investment banking firm that published and
distributed analytical research reports regarding publicly traded companies. ACI was also
engaged in proprietary trading and short-selling.68
(“Asensio.Com”) allegedly owned 100% of ACI’s shares, maintained ACI’s accounts,
67The Court cited Shared Communications, Servs. of 1800-80 JFK Blvd., Inc. v. Bell Atlantic Props., Inc., 692 A.2d 570, 573 (Pa. Super. 1997) for the proposition that there is “no per se rule that a parent and a wholly owned subsidiary cannot be found liable for civil conspiracy.”68Short-selling occurs when a speculator sells stock he does not own, in anticipation of a fall in price before his covering purchase of those shares.
and provided capital to ACI. Defendant Manuel P. Asensio (“Asensio”) was ACI’s
founder and chairman. He engaged in short-selling on ACI’s behalf, and produced
research reports on publicly traded companies, including reports on HBI.
Plaintiff brought causes of action against Defendants, alleging that Defendants
engaged in a scheme to short-sell and manipulate the price of HBI’s common stock
through Defendants’ publication of allegedly defamatory statements in a series of
research reports and press releases. The matter went to trial before a jury; however, the
Court dismissed Plaintiff’s claims against Asensio.Com on a directed verdict, based on
the finding that the evidence was insufficient to pierce the corporate veil or to show that
Asensio.Com participated in the alleged misconduct. The sole fact that Asensio.Com
was ACI’s parent company was insufficient by itself to establish either of these claims.
The jury found for Defendants on all of the remaining claims. HBI filed a motion
for JNOV, or in the alternative, for a new trial. Defendants filed a cautionary cross-
motion for issue preservation, contending that the Court erred in not granting a non-suit
as to Defendant Asensio’s personal liability. The Court ruled that Plaintiffs would be
granted a new trial on claims of defamation and disparagement due to Defendant
Asensio’s blatant misconduct before the jury. This made his cross-motion pertinent.
In Pennsylvania, under the participation theory, “corporate officers are personally
liable for the alleged tortious conduct of the corporation if they personally took part in the
commission of the tort, or if they specifically directed other officers, agents or employees
of the corporation to commit the act.”69 The Court ruled that it would be contrary to the
evidence to find that Defendant Asensio did not personally take part in the alleged
69Babich v. Karsnak, 528 A.2d 649, 654 (Pa. Super. 1987) (quoting Donner v. Tams-Witmark Music Library, 480 F.Supp. 1229, 1233 (E.D. Pa. 1979)).
tortious conduct. There was ample evidence in the record showing that Asensio wrote
the allegedly defamatory statements and that he stood behind these statements. Thus, the
Court had properly allowed the issue of Asensio’s personal liability on these issues to be
decided by the jury; issues on which the Court granted Plaintiff a new trial.
In addition to the foregoing Opinion, the participation theory received some
address in the following Opinions, summarized above: Banks v. Hanoverian, Inc.,
January Term 2005, No. 2807, 2005 Phila. Com. Pl. LEXIS 287 (C.C.P. Phila. June 23,
2005) (Abramson, J.); JK Roller Architects, LLC v. Tower Investments, Inc., July Term
2002, No. 02778, 2003 WL 1848101, 2003 Phila. Ct. Com. Pl. LEXIS 40 (C.C.P. Phila.
Mar. 17 2003) (Jones, J.). Further, in Commonwealth of Pennsylvania v. BASF
Corporation, March Term 2001, No. 3127, 2001 WL 1807788, 2001 Phila. Ct. Com. Pl.
LEXIS 95 (C.C.P. Phila March 15, 2001) (Herron, J.), summarized above, individual
officers, directors and employees against whom a cause of action could not be stated for
breach of a contract executed with a corporation, could be subjects of a civil conspiracy
claim where they were alleged to have committed various fraudulent or deceptive acts
along with their corporations. For a recent discussion of the participation theory and its
relationship to piercing the corporate veil, see Nordi v. Keystone Health Plan West, Inc.,

Madan, B.R.: Medicines During Pregnancy. Health for Millions. May-June 1998. p.29-30. ------------------------------------------------------------------------------------------------------------ There was a case from Germany in 1960 where a pregnant women named 'Sigi' took the drug - thalidomide - which was advertised as effective, safe, and non-addictive hypnotic for treatment of her insomnia. S

Constitution/Bylaws The Constitution/Bylaws of an Association provides a road map that a Provincial Sports Organization voluntarily adopts and agrees to follow in order to reach a desired destination, effectively and efficiently. They are a set of guidelines that specifically outline limits, boundaries and regulations by which an organization agrees to govern itself both internally and exter